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Hedonic Pricing of Dairy Bulls - An Alternative Index of Genetic Merit

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  • Richards, Timothy J.
  • Jeffrey, Scott R.

Abstract

This study investigates the use of hedonic pricing to identify the value of relevant production and type traits for dairy bulls in Alberta. A hedonic pricing model is estimated that models semen price as a function of individual production and longevity characteristics for a sample of Holstein bulls. This model corrects for sources of statistical bias in the data (i.e., censored data and endogenous supply problems). The results suggest that the most important characteristics in valuing dairy bulls are milk volume, protein and fat content, general conformation, body capacity, the popularity of the bull, and the probability that the bull's semen may be in short supply. This methodology may be used to establish a method of forecasting semen prices for newly proven bulls. The valuation procedure may be easily updated and adjusted as producers' breeding objectives change over time due to the changing economic environment. Further extensions of this method may be done to incorporate other characteristics and/or to assess shifts in producer breeding objectives over time. The results of this analysis suggest that hedonic pricing may be a superior method of placing a value on production and type characteristics for dairy bulls than the Lifetime Profit Index, currently being used by the Canadian dairy industry.

Suggested Citation

  • Richards, Timothy J. & Jeffrey, Scott R., 1995. "Hedonic Pricing of Dairy Bulls - An Alternative Index of Genetic Merit," Project Report Series 24035, University of Alberta, Department of Resource Economics and Environmental Sociology.
  • Handle: RePEc:ags:ualbpr:24035
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    File URL: http://purl.umn.edu/24035
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    1. Ethridge, Don E. & Davis, Bob, 1982. "Hedonic Price Estimation For Commodities: An Application To Cotton," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(02), December.
    2. Ethridge, Don E. & Neeper, Jarral T., 1987. "Producer Returns from Cotton Strength and Uniformity: An Hedonic Price Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(01), pages 91-98, July.
    3. Jordan, Jeffrey L. & Shewfelt, R.L. & Prussia, Stanley E. & Hurst, W.C., 1985. "Estimating Implicit Marginal Prices Of Quality Characteristics Of Tomatoes," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 17(02), December.
    4. Kerr, William A., 1984. "Selective Breeding, Heritable Characteristics And Genetic-Based Technological Change In The Canadian Beef Cattle Industry," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 9(01), July.
    5. Jordan, Jeffery L. & Shewfelt, R. L. & Prussia, S. E. & Hurst, W. C., 1985. "Estimating Implicit Marginal Prices of Quality Characteristics of Tomatoes," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 17(02), pages 139-146, December.
    6. Espinosa, Juan Andres & Goodwin, Barry K., 1991. "Hedonic Price Estimation For Kansas Wheat Characteristics," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
    7. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    8. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    9. Bowman Kenneth R. & Don E. Ethridge, 1992. "Characteristic Supplies and Demands in a Hedonic Framework: U.S. Market for Cotton Fiber Attributes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(4), pages 991-1002.
    10. B. Wade Brorsen & Warren R. Grant & M. Edward Rister, 1984. "A Hedonic Price Model for Rough Rice Bid/Acceptance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 156-163.
    11. Bryan E. Melton & W. Arden Colette & Richard L. Willham, 1994. "Imputing Input Characteristic Values from Optimal Commercial Breed or Variety Choice Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 478-491.
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    Cited by:

    1. Drucker, Adam G. & Gomez, Veronica & Anderson, Simon, 2001. "The economic valuation of farm animal genetic resources: a survey of available methods," Ecological Economics, Elsevier, vol. 36(1), pages 1-18, January.

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